Small Businesses and Scams

It is impossible to over-emphasise the challenges currently faced by businesses of all sizes across the UK. Those that managed to scrape through the pandemic hoped that 2022 would offer some respite. Unfortunately, this hasn’t been the case. With no end in sight to the cost-of-doing-business crisis and rising inflation, many small and micro businesses, freelancers and sole traders are wondering how they will survive.

With all this to worry about it’s hardly surprising therefore that one risk has emerged that may not be getting the attention it requires. Scams affecting small businesses are on the increase and business customers are being targeted in often sophisticated ways. Even experienced business owners and managers are affected, with scammers constantly evolving how they operate. The financial consequences of being scammed can be devasting, as can the mental impact of the stress and anxiety scams can cause.

So what can small business owners do? Firstly, knowledge of the risk is itself a powerful tool in preventing scams. By understanding that they may be targeted, businesses can ensure that managers and employees take the time to stop and think before making any payment. As the Take Five campaign states, by following the steps to ‘Stop’, ‘Challenge,’ and ‘Protect’, businesses have a better chance of identifying and preventing scams before they occur.

Learning about the different scams and frauds and how to prevent them is a key part of raising awareness. Depending on the size and type of business, training can be vital to make sure employees involved in payments or business banking know what to look out for. Understanding how the most common types of scams work and are presented, for example CEO scams and invoice and mandate scams, helps staff remain vigilant.

CEO scams involve situations where ‘criminals impersonate a boss or a senior manager to convince team members to make an urgent payment outside of their business’s internal procedures.’ Invoice and mandate scams are when ‘criminals pose as regular suppliers and convince the business to change their existing bank account details on file. They are then tricked into sending money to the account which is controlled by a criminal rather than the genuine supplier.’[1] Through our work at the Lending Standards Board, we know that banks are experiencing an increase in invoice scams this year, with a wide variety of business customers being affected.[2]

Alongside educating yourself or your team on identifying and reporting scams, having the right processes and procedures in place can act as a safeguard. This of course should be proportionate and reflective of the type of business. A franchise owner with different payment controllers spread across the country would likely require a more sophisticated payment process than an independent florist. However, the goal of protecting the business’s hard-earned money is the same. Small firms are targeted often because they are busy and facing multiple challenges. This highlights the need to think twice before making payments regardless of what else is happening at the time.

If a business does fall victim to a scam, it’s important to know what to do next. Any fraud or scam should be reported to your bank or payment provider and to Action Fraud. [3] Depending on the size of your business, your circumstances, and the scam itself, you may be reimbursed by your bank.[4] It’s also worth reflecting on how the scam occurred, to protect yourself in the future. How criminals target small businesses and sole traders is constantly evolving, so education has to be a regular activity to keep on top of any emerging trends or risks.

It is because of the numerous tasks and concerns facing businesses that they are vulnerable to being exploited by scammers. But through education, awareness, and taking time when completing seemingly simple transactions, businesses can be proactive in the face of scams and minimise the risk of falling victim to them.

[1] UK Finance, UK Finance Warns SMEs of Increased Risk of Targeted Scams

[2] Best Advice, Invoice scams responsible for most SME business fraud

[3] Take Five, Take Five to Stop Fraud

[4] LSB, The Contingent Reimbursement Model Code (CRM Code)

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